Google: YouTube Growing Nicely, Heavily Shared, Says Hillside

By Tiernan Ray

Hillside Partners‘s Rory Maher today writes that Google‘s (GOOGL) YouTube is gaining share of total online video watching, and has a positive amount of “sharing” of content by users who watch.

Based on Maher’s own tracking of 5,000 channels on YouTube, the property’s video views actually slowed their growth in the month of May, but is still strong, he writes:

Video views growth decelerated slightly in May ’14 over April ’14 while subscriber growth accelerated slightly, essentially generating flat May growth when compared to April and slightly below growth we’ve seen thus far in 2014. For example, annualized videos viewed growth decelerated to 34.4% in May ’14 from 41.4% in April ’14 while annualized subscriber growth accelerated to 40.5% in May ’14 from 34.3% in April ’14. May ’14 growth was slightly below the average videos viewed and subscriber growth generated thus far in 2014 of 42% and 48%, respectively. We’re not surprised by a modest deceleration in May ’14 growth since YouTube viewing likely resembles TV viewing to some degree and TV viewing typically decelerates in the Spring/Summer following the end of the prime time TV season.

Maher has the following table to represent the viewing trends (click for larger image):

Moreover, compared to established media such as MSN, writes Maher, the amount of sharing of stuff on YouTube, such as by postings on social networking that link back to the content, is much, much higher, he estimates, writing “We found that YouTube content was shared/distributed on social networks at an exponentially higher rate than many of its larger publishing competitors”:

We surveyed over 2000 articles of content on YouTube, MSN, Engadget, Huffington Post, and Imgur in order to track the average social media shares per article published during June. We found that YouTube videos were shared at an exponentially higher rate than other content, likely significantly growing its reach on social networks versus competing publishers. For example, YouTube videos published in June 2014 averaged 9552 social media shares per article across Facebook, Twitter, Linkedin, and Google+. This was exponentially more than MSN content at 1331, Engadget at 236, Imgur at 137, and Huffington post at 94.

He thinks the high level of linking in this way is a plus for YouTube revenue Google can get:

We believe the robust sharing we saw around YouTube videos is a positive for YouTube revenue growth, not to be confused with embedded videos, which monetize at a significantly lower rate than videos on the YouTube site. When a video is shared on a social network like Facebook a link to the video on YouTube is distributed that drives users to its YouTube page whereas embedded videos play on the site they are embedded on and can only run interstitial video ads, which generate significantly lower rates than pre-roll video ads. We believe users that find a video via a link shared by their friends are likely to be more engaged with the video than via a general link on a website or by browsing the YouTube site. In our opinion, the better engagement is a positive for YouTube revenue, all things being equal.

Maher’s also encouraged by what he sees in terms of branded channels on YouTube, meaning Google may stand to sell more “promoted” videos:

Brand channel viewing growth has accelerated throughout 2014 and was at its highest level in May ’14. For example, M/M videos viewed growth was 4.6% (55% annualized) in May ’14, up from 3.6% (43% annualized) in April ’14. M/M subscriber growth was 5.2% (62% annualized) in May ‘14, up from 3.6% (43% annualized) in April ’14. We believe this is a strong positive for overall YouTube revenue growth since one of the fastest-growing ad categories in our opinion is promoted videos, where pages pay to increase viewing of their videos. We believe brands are among the top buyers of this inventory in order to increase views of their videos, which are in many cases commercials/advertisements.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.